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Have Kelowna home values dropped 41%?

Re: Have Kelowna home values dropped 41%?

Postby Panzer130 » May 17th, 2012, 3:17 pm

I think the problem you will find is not the rise and fall of prices in RE (or any other market for that matter), but the large number of homebuyers who purchased homes with zero down, 40-year (and now 30-year, "5% cash back") mortgages who would not be able to afford said homes under normal circumstances - as in, 5 or 10% down and interest rates sitting at 6, 8, 10%.

Interest rates are at rock-bottom. They have one way to go... up. That means that at some point, mortgage payments are going to increase. Wages more than likely will not. What do you think will happen at that crossroad? Who pays for the fallout?


This is a very good point, but one that needs to be kept in perspective. Unfortunately many people are not fully educated on how our banking systems work. I would never claim to be an expert, but being in the building industry, I am very careful to keep an eye and ear to it.
Because it is also difficult to fully understand the system, many people look at what has happened in the USA and think the same can happen to us. This is incorrect.
In the USA, companies were able to sell sub prime mortgages to earn a profit. This highly motivated the industry to give out sub prime mortgages - resulting in a disaster when the rates changed and the markets crashed.

In Canada we do not have that system. Here if a bank gives a mortgage to someone who is not qualified, they take a massive risk of foreclosure. The last thing the bank wants is to own your land. They are in the banking business, not the real estate business.
However, they make huge profits from mortgages, so it is in their best interest to get out as many mortgages as they can at a reasonable risk.
One thing most people are not aware of is you need a higher credit rating and score to be able to get a 5% down 30 year mortgage. They were not handing these types of mortgages out to people barley squeaking out a living or bad credit history. Don't get me wrong, a large number of people will still be in big trouble when the interest rates change, but it will not be anything like we saw in the USA.
Also keep in mind that interest rate changes will go up in tiny little bits at a time. They are not going to jump up 2 or 3 percent at a time. (Unless the NDP get into power - but that's another topic)
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Re: Have Kelowna home values dropped 41%?

Postby 36Drew » May 17th, 2012, 4:13 pm

Panzer130 wrote:This is a very good point, but one that needs to be kept in perspective. Unfortunately many people are not fully educated on how our banking systems work. I would never claim to be an expert, but being in the building industry, I am very careful to keep an eye and ear to it.
Because it is also difficult to fully understand the system, many people look at what has happened in the USA and think the same can happen to us. This is incorrect.
In the USA, companies were able to sell sub prime mortgages to earn a profit. This highly motivated the industry to give out sub prime mortgages - resulting in a disaster when the rates changed and the markets crashed.

In Canada we do not have that system. Here if a bank gives a mortgage to someone who is not qualified, they take a massive risk of foreclosure. The last thing the bank wants is to own your land. They are in the banking business, not the real estate business.


...and this is a huge myth. Subprime mortgages in the USA were mortgages given to individuals who did not have the traditional 25% down. The mortgages were thus insured by the likes of Fannie Mae. To compound matters, ARM's were often used to help qualify borrowers. In Canada, we use the term VRM. Same thing.

In Canada, a lot of subprime mortgages were given and insured by CMHC. Many of those same home buyers took VRM's. While some have since renewed with fixed-rate mortgages, unlike in the USA, our mortgages actually renew every 1,3,5 years. A 30-year mortgage in the states is a 30-year term. Here, it's a 5-year term (or more or less depending on what you've signed up for).

What happened down south can indeed happen here.

Panzer130 wrote:One thing most people are not aware of is you need a higher credit rating and score to be able to get a 5% down 30 year mortgage. They were not handing these types of mortgages out to people barley squeaking out a living or bad credit history. Don't get me wrong, a large number of people will still be in big trouble when the interest rates change, but it will not be anything like we saw in the USA.


...and you've just describe a sub-prime mortgage. A "traditional mortgage" is defined as 20% down by our banking industry and regulators. Guess what a 5% down, insured mortgage is? That's right... Sub-prime. And yes... they've been handing out these mortgages to people barely squeaking out a living. Hell, even 0% down mortgages still exist in the form of "cash-back" mortgages.

The problem with all of this is that if these sub-prime mortgages start to default, then CMHC will have to pay. CMHC is a government entity. That means in the end, you and I will have to pay. I'm not cool with that.
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Re: Have Kelowna home values dropped 41%?

Postby fdgames » May 22nd, 2012, 12:23 am

*try again but this time make an actual point . . . without the personal attack/Jo*
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Re: Have Kelowna home values dropped 41%?

Postby econovan64 » May 22nd, 2012, 8:09 am

Prices are still dropping. A home I know of that was just listed the owner has said he will take almost any offer. He's willing to come down 50 to 75 thousand. He's owned it for decades and its paid for itself several times already. Its run down but the property is excellent.
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Re: Have Kelowna home values dropped 41%?

Postby Veovis » May 22nd, 2012, 9:39 am

mls #?
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Re: Have Kelowna home values dropped 41%?

Postby Queen K » May 22nd, 2012, 9:52 am

Me too.
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Re: Have Kelowna home values dropped 41%?

Postby kgcayenne » May 22nd, 2012, 9:54 am

Me three! (been looking for a good while now)
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Re: Have Kelowna home values dropped 41%?

Postby Fixer 166 » May 22nd, 2012, 10:51 am

I'm in, mls please. Is there rv parking?
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Re: Have Kelowna home values dropped 41%?

Postby Captain Awesome » May 22nd, 2012, 1:12 pm

I looked around Sunset Ranch the other day, lots of good houses there with excellent view. Prices are decent too.
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Re: Have Kelowna home values dropped 41%?

Postby GrooveTunes » Jun 20th, 2012, 8:02 pm

http://www.cbc.ca/news/business/story/2012/06/20/mortgage-rules-tightened.html

Kiss the high real estate values goodbye. About time.
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Re: Have Kelowna home values dropped 41%?

Postby Queen K » Jun 20th, 2012, 11:17 pm

That's right, because getting a rental property will now seriously only be for the rich. More middle class up and comers will be squeezed out because it is more difficult to make that 20 percent hurdle in a hot market.
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Re: Have Kelowna home values dropped 41%?

Postby normaM » Jun 21st, 2012, 5:47 am

Captain Awesome wrote:I looked around Sunset Ranch the other day, lots of good houses there with excellent view. Prices are decent too.

and the planes made no noise at all
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Re: Have Kelowna home values dropped 41%?

Postby Static » Jun 21st, 2012, 6:53 am

GrooveTunes wrote:http://www.cbc.ca/news/business/story/2012/06/20/mortgage-rules-tightened.html

Kiss the high real estate values goodbye. About time.

It will be very beneficial over the long run. I am all for it.
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Re: Have Kelowna home values dropped 41%?

Postby kgcayenne » Jun 21st, 2012, 7:05 am

The way I see it, a mortgage and house are not piggy banks, these changes were needed.
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Re: Have Kelowna home values dropped 41%?

Postby jsytnick » Sep 9th, 2017, 9:09 am

Just thought I'd dig this gem up. How are those predictions working out for everyone? *removed*
Last edited by ferri on Sep 9th, 2017, 9:58 am, edited 1 time in total.
Reason: Really? You bumped an old thread to make a personal attack?

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